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Paramount shares fall after company agrees to merge with Skydance
Paramount shares (FOR) fell on Monday after the entertainment giant announced plans to merge with Skydance Media in a deal that would mark the end of the Redstone family’s control of the company.
The agreement, announced on Sunday night, comes after years of speculation about agreements around Paramount, which is controlled by Shari Redstone through his family’s holding company, National Amusements (NAI).
Paramount shares fell about 3% in midday trading the following day as investors digested the terms of the new deal, which includes Skydance first acquiring NAI (and Redstone’s stake) for $2.4 billion in cash before completing a full merger.
National Amusements owns approximately 10% of Paramount’s equity value and holds 77% of the voting shares valued at approximately $1 billion.
Under the terms of the deal, Paramount’s Class A voting shareholders will receive $23 per share, while non-voting Class B shareholders will be eligible to cash out at $15 per share, representing a premium of approximately 35% based on current trading levels.
Red stone ended negotiations with Skydance in June after months of comings and goings, which included several sweetened offers from the production studio after non-voting shareholders concerns expressed on the terms of the initial discussions.
Negotiations resumed less than 30 days later when Skydance amended its previous offer.
“From our perspective, this deal is likely slightly worse for Class B holders than the previous deal, but likely still values PARA at ~$13,” wrote KeyBanc analyst Brandon Nispel. “Given what other reports suggest Barry Diller’s IAC is also interested in the NAI and given the schizophrenic nature of previous discussions, we think it is best for investors to simply wait to learn more about the future strategy.”
‘Linear is challenged’
Paramount owns a number of media assets, including CBS, BET, Showtime and MTV, along with its namesake studio business and streaming platform. Skydance has previously collaborated with Paramount on the production of popular film franchises, including “Mission: Impossible,” “Top Gun: Maverick” and “Transformers.”
“As a longtime production partner of Paramount, Skydance knows Paramount well and has a clear strategic vision and the resources to take it to the next stage of growth,” Redstone said in a press release.
Skydance, which will be valued at $4.75 billion after the all-stock deal closes, said it will inject $6 billion of cash into Paramount, with $1.5 billion going directly to its debt-laden balance sheet.
The story continues
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal executive Jeff Shell, who was expelled last year for an “inappropriate relationship” with an employee, will serve as president.
In a conference call Monday morning, the new leadership team laid out its strategic vision for Paramount, which will include $2 billion in cost cuts that will be delivered “very quickly.”
“We love the creative engine of this company. But obviously a big part of the company is in the linear world and we know that linear is challenged and in decline,” Shell said.
“I think a lot of us in the business know that we need to manage these businesses differently as they decline,” he continued, adding that the goal is to focus on generating future cash flow.
Shari Redstone attends the premiere of “Ghost in the Shell” at the AMC Loews Lincoln Square in New York City on March 29, 2017. (Evan Agostini/Invision/AP, File) (Evan Agostini/Invision/AP)
The two sides also agreed to a 45-day “test period” allowing other potential bidders to submit offers.
The deal, expected to close in the first half of 2025, is still subject to regulatory approval. Skydance is widely expected to look to offload non-core assets, such as BET, after the merger is completed.
“One area that remains unclear is how much of the new company Skydance would retain,” Third Bridge analyst Jamie Lumley wrote in a note to clients. “We have heard from our experts for some time that the best strategy for Paramount is to spin off non-core assets.”
The confusion of negotiations has been a hindrance to the company as a whole.
Amid the drama, Paramount announced the departure from CEO Bob Bakish in late April, after he was allegedly at odds with Redstone on the Skydance deal. He was replaced by an “Office of the CEO” consortium made up of three division heads of the company.
Alexandra’s Channel is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send an email to alexandra.canal@yahoofinance.com.
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